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Hey, Fast Feeders: C-Stores Are Out to Eat Your Lunch

Chains From 7-Eleven to Quick Chek up the Ante With Better, Fresher Menus

Say goodbye to that lone, hours-old hot dog twirling on the roller grill.

Once associated with barely edible eats, convenience stores are starting to give fast-food chains a run for their money. In the past four or five years, C-stores have taken off, building on breakfast programs that began with the standard coffee and doughnuts to a more robust and palatable menu including fresh salads, sandwiches and burgers.

"It's on," said Tim Powell, director-research and consulting at Technomic. "It's been very competitive. C-stores will say the No. 1 concern for growth over the next two or three years is [quick-service restaurants]."

The biggest player in the C-store space is 7-Eleven, which declined to comment for this story. It has 7,000 locations in the U.S., and roughly 15% of its $18.5 billion in revenue comes from food service, according to Technomic. It's followed by Circle K, which had 4,182 locations as of 2010.

Most C-store chains are regional -- after 7-Eleven or Circle K there is a significant drop-off in the number of stores -- and have only a fraction of the locations that 7-Eleven or McDonald's, Burger King and Wendy's do.

But regional chains like Quick Chek, which has about 125 stores, have long offered fresh sandwiches and other fast food. Other C-stores ramping up in the food department include Thorntons, QuikTrip, Wawa and Sheetz.

"The total food-service category continues to grow and now makes up a larger portion of Thorntons' overall business than ever before," said Melina Patterson, senior food-service category manager at the chain, which has about 165 stores in five states. Ms. Patterson added that with additional resources like test kitchens and "better focus and execution, the category is expected to become an even bigger part of the business." Breakfast is the largest daypart in food service for Thorntons.

QuikTrip, which has about 560 stores in 10 states, began retrofitting locations in 2005 to improve its fresh-food offerings. Previously the chain carried little more than prepackaged microwaveable sandwiches, but Quick Trip now offers fresher sandwiches, salads and fruit, and pastries, with more on the way.

Aside from ready-to-eat fast food, the chain is eyeing the grab-and-go niche, which lets customers purchase items such as pizza and pasta and warm them up at home.

Quick Trip recognizes that C-stores have a bit of an image problem when it comes to fresh food.

"There's no question there's a perception issue," said Mike Thornbrugh, spokesman for Quick Trip. "I don't think it's aimed at Quick Trip, but that 's the nature of the industry. Those kinds of thoughts by the general public are going away. It just takes a long time."

The change in just how many consumers are turning to C-stores is beginning to show up in the numbers. Visits for food for immediate consumption were up 3% for the year ending in October, according to NPD Group, compared with an increase of 1% for fast-food chains. In the same period, overall restaurant industry visits were flat.

C-stores are heavily dependent on the morning and on snacks for much of their traffic; those periods account for 34% and 41% of traffic, respectively, according to NPD. Lunch -- which accounts for 19% of food traffic -- and breakfast are both up 5% for the year ended in August. C-stores account for 22 % of the snack market in the U.S., while fast-food chains account for 20%, NPD said.

Part of that increase in traffic can be attributed to value.

"Convenience stores have been able to [compete] because they've taken a cue from fast food in that it's all about convenience and gaining frequency," said NPD restaurant industry analyst Bonnie Riggs. "They were not ones to historically do promotional activity. ... But now they've really tapped into the value-conscious consumer."

Because of their size and regional distribution, C-stores don't have nearly the ad budgets of , say, McDonald's. Much of C-store advertising is in-store, at their own gas pumps, or on radio and billboards.

"It's a challenge," concedes Mr. Thornbrugh. "But we only operate in a limited area. We're in 10 states, getting ready to go into 11 states. We don't have the overhead to reach all 50 states. We don't consider it a problem; we consider it an opportunity."